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Friday, October 27, 2006

Google rides the wave, Microsoft follows, Yahoo is in pain

Following our question about where Microsoft business model was going - read Hey Microsoft, are you becoming Googled? - and now that all 3 Internet titans have published their quarterly results, let's stop for a while and understand who is ahead of the curve.

Assuming financial analysts and investors are doing their due diligence properly, we could rely first on their feel for it. So, looking at the comparison chart between all three stocks Microsoft (MSFT), Google (GOOG), and Yahoo (YHOO) for the last 6 months, Google seems to ride the wave, Microsoft catching up and Yahoo heading south. Google even afforded to reach a new stock price all time high of $484.64 on 23 October, briefly surpassing $150 Billions for the first time! Remember, they acquired YouTube for $1.6B in stock... that's a dime.

I'm pretty in line with this view of the world as it reflects today's perception of who are the leaders in the on-line business. Here is a quote from AP on Monday supporting it:

"The third-quarter performance underscored the substantial advantage that Google has built over chief Internet rivals Yahoo Inc. and Microsoft Corp., leading most analysts to conclude that the company will continue to dominate the online advertising market while it explores other potentially lucrative opportunities." -- Michael Liedtke, AP Business Writer

But one should also keep in mind that very few players in this industry have the financial muscle to create and maintain huge architectures supporting Software as a Service (SaaS) delivery to the masses. We're talking $Billions fellow marketers, not VC money (sorry Netvibes fellows ;-) ).

Why should WE care? Well, if you only rely on search engine market shares to place your search marketing bets, the game is pretty simple: Google 49.2%, Yahoo 23.8%, MSN 9.6% according to Nielsen Netratings. Google market share surges even to more than 80% in some countries like France. The reason why we should care is Marketing 2.0 again. Search Advertising is powerful but not enough. Why would all these major players invest in Web 2.0 emerging companies otherwise? The question is for us to understand what are tomorrow's business models in a variety of industries like software, music, videos and what have you. If revenue is bound to come from on-line advertising in the future, it clearly means all other advertising form factors will decrease. Our marketing-mix, in a Marketing 2.0 era, will then significantly change and above all, marketing performance will be heavily impacted. To be digged.